1. Field of the Invention
The disclosed invention relates generally to conducting electronic auctions, and in particular to a method of adjusting bids in electronic auctions.
2. Description of Background
Procurement of goods and services has traditionally involved high transaction costs, especially information search costs. The introduction of electronic commerce has introduced new methods of procurement that lower some of the transaction costs associated with procurement. Online procurement, in particular business-to-business electronic commerce, matches buyers and suppliers so that transactions can take place electronically.
Four models of online procurement have been developed: catalog, buyer-bidding auctions, seller-bidding auctions and exchange marketplaces.
The “catalog” model was the earliest form of online procurement. Initially, catalogs were developed by sellers, typically suppliers, to help customers obtain information about products, and order supplies electronically. These first electronic catalogs were single-source; i.e. they only allowed customers to obtain information and products from that supplier.
Although these first electronic catalogs greatly reduced the information search costs associated with procurement, customers were disadvantageously “locked in” to one supplier at each electronic catalog. Customers were thus unable to compare a number of competing products in a single catalog. Therefore suppliers with single-source catalogs began including competitors' products in their systems. The inclusion of competing products in electronic catalogs reduced procurement information search costs even further. By offering competing products, electronic catalogs became “electronic markets”.
However, many of these catalog systems are biased toward the supplier offering the electronic catalog. Therefore, third-party “market makers” have developed unbiased markets for many standard products and services. By having a market maker develop a market for certain products by offering an unbiased electronic catalog, procurement costs are further lowered by promoting competition between suppliers as well as reducing information search costs for buyers.
Electronic commerce using the electronic catalog model typically involves one buyer and one seller at a time. When many buyers compete for the right to buy from one seller, a buyer-bidding auction model, or forward auction is created.
In a forward auction, various goods or services may be simultaneously placed for auction. As in an offline auction, bid prices start low and move upward as bidders interact to establish a closing price. Typically, the auction marketplace is one-sided, with one seller and many potential buyers, although multiple-seller auctions are possible.
The catalog and buyer-bidding auction models have limitations and do not work in every situation. For example, if a buyer requires a custom product, it is not possible for suppliers to publish set prices for a catalog market. Therefore, when a buyer requires a custom or hard-to-find product, pricing for that product typically will not be found in a catalog. Likewise, it is difficult to specify a custom product and identify buyers who might use that custom product for a buyer-bidding auction. There are fewer suppliers and no standard product and pricing information available for the buyer of custom industrial products.
Traditionally, when a company requires a custom product, a buyer for the company procures the product by searching for potential suppliers, then acquiring price quotes from the potential suppliers for the needed custom product. The search is slow and random, and typically relies heavily on personal relationships. The costs associated with locating vendors, comparing prices, and negotiating a deal are therefore large. The cost of switching suppliers is also very large, which means that an incumbent supplier's quoted price is most likely not the lowest price he could offer because the incumbent supplier knows the buyer would face switching costs to use another supplier. As a consequence, new suppliers have a difficult time entering the market.
Therefore, supplier-bidding auctions for products and services defined or specified by a buyer have been developed. The assignee of the present application has developed a system in which sellers downwardly bid against one another to achieve the lowest market price in a supplier-bidding auction.
In both forward and reverse auctions, the dynamics of bidding in an auction work to the advantage of the sponsor of the auction. For example, in a forward auction, bidders may bid more than they would have paid otherwise for a product or service during the final “going, going, gone” stage of the auction because of the time pressure and excitement of the auction atmosphere. Likewise, in a reverse auction, bidders may bid less than they would have bid on a supply contract outside the auction.
To take full advantage of these types of bidding dynamics, an electronic auction should facilitate bid entry. If the process of submitting a bid to the electronic auction is difficult or cumbersome, the bidder may be less likely to make a bid. Additionally, in the final stages of an auction, bids are made very rapidly, and a bidder must be able to enter a competitive bid quickly and easily in order to “beat the clock”.
Additionally, in many auctions, bids are dependent on more than price. For example, in a reverse auction for custom industrial supplies, a bidder may be bidding both price and volume. Thus, it would be desirable to have a system that allowed a bidder to easily and quickly change any aspect of his bid, not just price.
Therefore, what is needed is a method of entering and adjusting bids that allows the bidder to easily set or change any aspect of the bid and submit the bid into an electronic auction.